Air Deccan: The First Low Cost Airline in India

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Case Details:

Case Code : BSTR134
Case Length : 20 Pages
Period : 2003 - 2004
Organization : Air Deccan
Pub Date : 2004
Teaching Note :Not Available
Countries : India
Industry : Aviation

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Target Market and Positioning

Analysts felt that there was huge growth potential for LCAs in India due to the country's huge 200 mn middle income group population. Gopinath expected that at least one fourth of this population would use LCAs in the near term.

He pointed out that India had 15 mn rail travellers every day. Of these 1,70,000 travelled in the air conditioned class and were potential customers for Air Deccan owing to the comparable prices. Gopinath further said that the US had 40,000 commercial flights every day whereas India had only 400 flights a day. But India had four times more population than the US, so it could theoretically run 1,60,000 flights daily! Gopinath said, "Assuming that we had tapped 1 per cent of this potential, we still need 1,600 flights a day. Therefore, we need a quadruple jump in the number of commercial flights." Air Deccan defined its target segment as upper middle class in the short term but planned to tap the lower middle class aggressively in a couple of years...

The Challenges

Even before Air Deccan started operating on long haul routes, leading newspapers in India reported that all air tickets in the Rs 700 category were sold out for 2004. The response for the flights was reportedly such that Air Deccan's website was jammed and the call centre flooded with calls requesting booking.

Since the announcement of the Rs 700 category fares, the airline received 10,000 calls a day as against 5,000 a day earlier. In response to Air Deccan's plans to offer services on major trunk routes, the FSAs quickly announced a fare reduction on these routes (Refer Exhibit X for new flight services of Air Deccan between April and September 2004). Sahara announced its "Apex fare scheme" for metros and reduced its fares by 30% (Refer Table I for Sahara's Apex Fare Schemes). JA followed by cutting prices on major metro routes by as much as 69%. IA also launched a super apex scheme and cut its prices to match that of JA. Air Deccan's success encouraged many other companies to establish LCAs...


Exhibit I: Statutory Requirements of Scheduled Airline Services
Exhibit II: A Note on Jet Airways
Exhibit III: Aviation Policy on Passenger and Air Cargo Transport
Exhibit IV: Naresh Chandra Committee Report: Key Proposals
Exhibit V: Air Deccan's Aircraft
Exhibit VI: Security Regulations of Air Deccan
Exhibit VII: Fare and Cost Structure of Air Deccan Compared to Fsas and Railways
Exhibit VIII: Inside View of Air Deccan's Atr Air Craft
Exhibit IX: Air Deccan's Print Ad
Exhibit X: New Flight Services Offered by Air Deccan (Between April and September 2004)
Exhibit XI: New LCA's Planning to Enter Indian Aviation Industry


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